New home loans down by 71%
Updated on 01 September 2008
The number of mortgages approved for people buying homes dived by 71% during the past year to hit a new record low, figures have shown.
Just 33,000 mortgages were approved for house purchase during July - 6% fewer than in June, and down from 114,000 in July last year, according to the Bank of England.
Pipeline loans for people remortgaging also continued their downward trend, dropping to 69,000 during the month, a 14% slide compared with June's approvals figure.
The total value of all mortgage approvals continued to slide during the month to reach the lowest level since October 2001 of £14.57 billion, 12% less than in June.
The figures, which come as property website Hometrack said house prices in England and Wales had fallen by 5.3% during the past year, show the drag the credit crunch is continuing to have on the mortgage and housing market.
People planning to move are sitting on their hands as they wait for the outlook in the market to become clearer, while those who want to go ahead are struggling to raise the finance they need.
Existing homeowners coming to the end of mortgage deals are also delaying switching to a new rate and are instead staying on their lender's standard variable rate.
This inertia is likely to be caused by them either hoping the mortgage market will improve in the near future, enabling them to get a better deal if they wait, or because they do not have enough equity in their home to qualify for a more competitive rate in the current climate.
Total mortgage advances fell for the sixth month in a row during July to just £21.51 billion, the lowest level since December 2004, the Bank of England said.
But net mortgage lending, which strips out redemptions and repayments, increased slightly to £3.23 billion, up from £3.14 billion, although it is still 65% lower than in July last year.
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